Monday, December 29, 2008

Analogy #229: Gutter Talk

THE STORY

A few days ago, we suffered torrential rain at my house.The rain was coming down about as fast as it could, along with strong winds, thunder and lightening.

As I looked out the window, I noticed that the gutters were plugged.The rain overflowed the plugged gutters and just poured over the top of them onto the ground.

I thought about going out there to unplug them, but given the wind and the rain and the lightening, I didn't think being up on an aluminum ladder would be a good thing.All I could do is stare out the window at the disaster.

I started thing about how one never thinks about cleaning the gutters except when it is raining and it is already too late to do so.I should just schedule a date on my calendar to automatically check the gutters every autumn.

THE ANALOGY

When you can see the disaster, it is easy to recognize the need for change.However, by then, it can be too late to do anything.I could see the need to clean my gutters when the rain was pouring out of the top, but it was too late to fix the problem.

The same is true in business.By the time a business' failure is obvious, it is usually too late to fix the strategy.

Strategic planning shouldn't be a reaction to disaster.It should be put on the calendar to be done on a regular basis, as I should have done with gutter cleaning.That way, instead of reacting to disaster, one is proactively preventing disaster.

THE PRINCIPLE

The principle here is that prevention is better than correction.Sure, one can fix a problem through correction, but usually there is some residual damage from those problems which slow you down—overcoming customer disappointments, internal political upheaval, lost cash flow, lost credibility, inability to meet debt obligations, etc.Your strategic options in such an environment may be narrower.

Just look at the US auto industry.They are trying to correct a problem that has been growing worse for years.The longer they waited, the more their "profit gutters" became plugged with bad business practices.Then the storm came and their only hope was to call in for a government bailout.If they had gotten in front of the problem and cleaned out the gutters early (before the storms), they could have prevented this mess.

This was the successful path Caterpillar took.They took on the bloated organizational structure and union issues early, when times were still good.This allowed them to become a world leader.

If you look at business press releases, about the only time you see the word "strategy" anymore is when a company announces that it has hired a firm to help it look for "strategic alternatives."In plain talk, what they are saying is that they have so screwed up the business that they cannot fix it, so they are either looking for someone to buy them out or, if that doesn't work, they are going to liquidate the business.

In my mind, those are two lousy strategic alternatives (sell or close).Where's option #3?There is no third option, because the companies have waited too long.The economic storms have already come, with high winds and lightening.The pipeline to profits is plugged and it is too late to go out and unplug it.Selling or liquidating is all that is left.Given the economic storm we are currently in, I suspect we will be seeing a lot more of these "strategic alternative" announcements.

When the days are sunny and everything appears to be well, it is easy to forget about checking those gutters.However, if you want to prevent the buildup of gunk in the gutters, you need to do regular maintenance during the good times.

There's an old saying that "if it ain't broke, don't fix it."In other words, as long as things appear to be working, leave them alone.This concept, however, is disastrous when it comes to strategy.The environment is always in a state of flux—ever changing.Periodic strategic assessments and adjustments are needed to make sure the strategy is still properly aligned with that changing environment. If you wait until the business model is completely broken, it may be unfixable.

Instead, the best time to make these strategic adjustments is when times are still good.In the good times, consumers still like and trust you, and are more forgiving of change.Your cash flow is still strong enough to fund the transition.And most importantly, you still have time to make the changes before the storms come.

Therefore, I recommend two things.

1) Make periodic strategic assessments, even when times are good.Get it on your calendar.Get in front of change rather than playing catch-up after change has already created severe problems.

2) Create a method to monitor key elements critical to your strategy.That way, you can tell when the gutter is just starting to get clogged, so that you can act quickly, before it becomes a problem.They say "out of sight, out of mind."If you want to keep awareness of potential problems on the top of mind, you need a dashboard which lets you see it and measure it all the time.

Yes, we are currently in the middle of an economic storm.But eventually, this storm will go away and the sun will return.When that time comes, use the reminder of all the grief you are dealing with today to motivate yourself to prevent future pain though these two suggestions.

SUMMARY

Don't wait until times get bad to examine your strategy.By then, it can be too late.Examine your strategy during the good times.That way, you can prevent problems rather than fix problems.Prevention is always easier than correction.

FINAL THOUGHTS

When the rainstorm ended, I belatedly went outside to clean out my gutters.Unfortunately, I had two problems.First, by the time the rain had ended, it was night and I was groping around in the dark trying to clean the gutters by "feel."Second, I had no idea how much of the leaves had gotten into the downspouts and were clogging areas I could not get to.

I would have been much better off doing this on a sunny day before the buildup had occurred.

About Me

I have over 25 years of experience, having worked in strategy with a number of leading US retailers. You can learn more about me by visiting my digital resume (www.VisualCV.com/geraldnanninga) of the site for consulting (http://planninga-from-nanninga.webs.com)